9911796707
TMI Blog2024 (12) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... case furnished by the appellant, whereas the provisions of 8 (b) of Schedule III of the CGST. Act, 2017 talks about Supply of goods. by the consignee to, any other person, by endorsement of documents of title to the goods . It is to be noted here that the above phrase specifically refers to the term by endorsement of documents in absolute terms, and not just transfer of title to the goods in general. It is opined that the term by endorsement assumes significance in the context of the instant case. On a conjoint reading of the phrases, along with its properties and specifications, i.e., by endorsement and documents of title to the goods , it becomes clear that the activity relating to Supply of goods, by endorsement of documents of title to the goods as enumerated under para 8 (b) of Schedule III of the CGST Act, 2017 refers to the mode of transaction for a specific activity, as against the practice adopted for normal sale transactions - paragraph 8 (b) of Schedule III is conceptually linked to High Sea Sale . The appellant raises invoices to transfer the title of the goods to the customer while the goods are lying within the FTWZ unit in the instant case, and that they are not int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... III of the CGST Act, as long as it does not relate to supplies from Duty Free Shops at arrival terminal in international airports to the incoming passengers. - SH. ASHISH VARMA, AND DR. D. JAGANNATHAN MEMBER Represented by: Shri K. Sivarajan, Partner, PW Co., LLP, Shri Ankit Dawar, Partner, PW Co., LLP, Shri Pankaj Aggarwal, AGM Taxation. (Passed by Tamil Nadu State Appellate Authority for Advance Ruling under Section 101(1) of the Tamil Nadu Goods and Services Tax Act, 2017) PREAMBLE 1. In terms of Section 102 of the Central Goods Services Tax Act 2017/Tamil Nadu Goods Services Tax Act 2017 ( the Act , in Short), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the Order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the appellant has been given an opportunity of being heard. 2. Under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the FTWZ followed by a subsequent removal from FTWZ Unit would get covered under para 8 (a) of Schedule III of the CGST Act or Tamil Nadu Goods and Services Tax Act, 2017 (hereinafter referred to as the TNGST Act) and the rules made there under? Query 2 - If answer of the above query is No, whether Integrated Goods and Services Tax (IGST) is payable by the Applicant on goods stored in FTWZ unit and supplied to its customers in DTA unit, in addition to the customs duty payable [i.e. Basic Customs Duty (BCD) + IGST] by the customer in DTA on removal of goods from the FTWZ unit in accordance with Section 30 of Special Economic Zone ( SEZ) Act, 2005 and read with the Customs laws? Query 3 Irrespective of whether supply of goods lying in FTWZ unit to DTA customers is covered under Schedule III of the CGST Act or not, whether any reversal of input tax credit of common inputs/ input services/ Capital goods is required at the hands of the Applicant in terms of recent amended Section 17 (3) of the CGST Act? 3.2. The AAR vide Ruling No. 17/ARA/2024 dated 25.07.2024 ruled as follows:- (i) Yes. The activity of the transfer of title of goods stored in FTWZ Unit by the applicant to its customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the Customs Act. A.5 Further the AAR s findings in para 19 of the impugned ruling that FTWZ constitutes a warehouse based on the activity of warehousing undertaken, is incorrect. A.6 Furthermore, the Customs warehousing regulations provide for a comprehensive framework for the management and operation of Customs warehouses, whereas these regulation do not apply on goods stored in FTWZ, for which the provisions of SEZ Act and Rules provide guidelines for the licensing, management and operations of FTWZ unit. A.7 Therefore, the AAR s findings that the FTWZ is akin to a customs-bonded warehouse, thereby bringing the goods stored within it under the purview of paragraph 8 (a) of Schedule III, is flawed. A.8 That the appellant would like to highlight the fact that their reliance on the ruling in the case of Haworth India (P) Ltd., is valid, as the said ruling has not been set aside by the Appellate Authority for Advance Ruling, Tamilnadu, but had only remanded the case, as the AAR had failed to consider the appellant s submission in its entirety. A.9 Accordingly, the appellant reiterated the detailed submissions made before the AAR and concluded that in view of the foregoing, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17 (3) specifies that only certain prescribed transactions from paragraph 8 (a) are required to be included in the value of exempt supplies. In particular, explanation 3 to Rule 43 of the CGST Rules provides that the transactions to be included are those involving the supply of goods from Duty-Free Shops ( DFS ) at arrival terminals in international airports to incoming passengers. This clearly indicates that not all transactions falling under paragraph 8 (a) should be treated as exempt supplies for the purpose of ITC reversal. C.4 In this regard, the appellant reiterated and resubmitted the submissions made already before the AAR, and concluded that irrespective of whether or not the FTWZ or the SEZ is covered under paragraph 8 (a) of Schedule III, the Appellant would not be required to reverse ITC and therefore, the impugned ruling to the extent it ignores the amendments in entirety and aforesaid interpretation, is incorrect and liable to be set aside. 3.4 Accordingly, in respect of the queries raised by them, the appellant were of the viewpoint that, (1) FTWZ does not qualify as a customs warehouse under the provisions of the Customs Act. Thus the transactions are not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Station in turn is defined under Section 2(13) of the Customs Act, which means any customs port or land customs station . On the other hand, as per Section 53 of the SEZ Act, 2005, a Special Economic Zone is deemed to be port under section 7 of the Customs Act. Accordingly, the AR contended that a FTWZ which forms part of SEZ, is to be treated as a port and not as a warehouse and therefore the instant transaction does not get covered under paragraph 8 (a) of Schedule III. They further stated that the findings of the AAR is incorrect to that extent, and that it ideally gets covered under paragraph 8 (b) of Schedule III that talks about supply of goods by endorsement of documents of title of the goods, before clearance for home consumption. 4.4 Regarding the second query relating to supply of goods to its customers in DTA unit, the AR stated that the same was not answered by the AAR in view of the fact that the first query was answered in the affirmative. The AR explained in detail about the legalities involved in the instant issue, and requested for a ruling on the same. 4.5 As regards the third query in relation to ITC availment in respect of such transactions, the AR conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. Accordingly, they enclosed sample copies of documents in relation to the category of transactions referred above, including the documents in relation to import of goods from outside India into FTWZ unit, viz., copy of invoice packing list, bill of entry for importing goods into FTWZ unit, Form-13, Seaway bill and Delivery Order. They also enclosed the relevant pages of 47th GST Council meeting as referred by them in para C-4 of the appeal to clarify that the amendment regarding restriction for availing ITC in terms of Section 17 (3) of CGST Act applies only to supplies by Duty Free Shops. Further, in relation to the aforesaid submissions, they requested for another opportunity to explain the same, before the appellate authorities take any further decision. 4.8 As requested, the appellant was accorded another opportunity of hearing on 07.11.2024, and Shri K. Sivarajan, Partner, PW Co., LLP, Mandaveli, the authorized representative (AR) of M/s. Panasonic Life Solutions India (P) Ltd., appeared for the Personal Hearing. The AR briefly summarized the submissions made by them already during the personal hearing held on 03.10.2024. The AR further stated that as undertaken, the sample ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh mail dated 11.11.2024, viz., the Invoice and Packing List No.IJP23110277 dated 08.11.2023, Bill of Lading No. 015DX22880, Bill of Entry for Warehousing No. 1026545 dated 08.12.2023, for receipt of goods into FTWZ, and Commercial Invoice Packing List No. PSFSIN/2324/C0073 dated 19.12.2023 and Bill of Entry for Home consumption (SEZ to DTA unit) No. 2031641 dated 30.12.2023 towards supply of goods to a DTA unit. DISCUSSION AND ANALYSIS 5.1 We have carefully considered all the material available on record, the applicable statutory provisions, the Grounds of Appeal furnished by the appellant, the submissions made during the personal hearings held on 03.10.2024 and 07.11.2024, the documents furnished through their letter dated 15.10.2024 and through their mail dated 11.11.2024. 5.2 We observe that in the instant case, the moot point that requires attention, is as to whether the transfer of title of goods stored in FTWZ by the appellant to its customers in DTA or multiple transfers within the FTWZ, before the goods are actually cleared into DTA for home consumption, gets covered under paragraph 8 (a) or under paragraph 8 (b) of Schedule III of the CGST Act, 2017. For facilitation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore final clearance for home consumption by the end customer. Such transfer should be treated as akin to transfer through endorsement before clearance as envisaged in the said para. 5.5 Under the facts and circumstances of the instant case, we observe that transfer of title of goods lying in FTWZ takes place admittedly as per the Statement of facts of the case furnished by the appellant, whereas the provisions of 8 (b) of Schedule III of the CGST. Act, 2017 talks about Supply of goods. by the consignee to, any other person, by endorsement of documents of title to the goods . It is to be noted here that the above phrase specifically refers to the term by endorsement of documents in absolute terms, and not just transfer of title to the goods in general. We are therefore of the opinion that the term by endorsement assumes significance in the context of the instant case. 5.6 In this regard, it is seen from the Principles of Insurance and Banking authored by Dr. S.S. Kundu, the term Endorsement and its properties has been discussed as below:- 1.9 ENDORSEMENT The word endorsement in its literal sense means, writing on the back of an instrument. But under the Negotiable Instruments Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the activity relating to Supply of goods, by endorsement of documents of title to the goods as enumerated under para 8 (b) of Schedule III of the CGST Act, 2017 refers to the mode of transaction for a specific activity, as against the practice adopted for normal sale transactions. Further the second part of phrase forming part of paragraph 8 (b), i.e., after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption. , points to a situation when the goods lie midway, or, are in transit. Ideally, when a High Sea Sale takes place, Bill of lading normally becomes the crucial document that could be subjected to endorsement. We are of the opinion that this is precisely the reason as to why paragraph 8 (b) of Schedule III is conceptually linked to High Sea Sale . 5.9 Further, we find that the appellant have stated in para 14 of the Statement of facts , filed along with the application for appeal, as follows :- Further, upon finalisation of customer, the Appellant would raise a tax invoice (without tax) on the Domestic Tariff Area ( DTA ) customer in foreign currency. In case of supply to overseas entity, the Appellant issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituation/activity. 5.11 Once the application of paragraph 8 (b) of Schedule III of the CGST Act, 2017 to the instant case is effectively ruled out, it becomes imperative to examine as to whether the provisions of paragraph 8 (a) of Schedule III of the CGST Act, 2017, viz., Supply of warehoused goods to any person before clearance for home consumption , applies to the instant case or not. 5.12 In this regard, the explanation 2 to Schedule III of the CGST Act, 2017 that runs as below, merits attention, i.e., Explanation 2 .-For the purposes of paragraph 8, the expression warehoused goods shall have the same meaning as assigned to it in the Customs Act, 1962. As per Section 2 (44) of the Customs Act, 1962, (44) warehoused goods means goods deposited in a warehouse And, as per Section 2 (43) ibid, (43) warehouse means a public warehouse licensed under section 57 or a private warehouse licensed under section 58 or a special warehouse licensed under section 58A. In this regard, we observe that as rightly pointed out by the taxpayer, the definition of warehouse as in the Customs Act, 1962, gets restricted to the Customs bonded warehouses under Sections 57, 58 and 58A of the Act, ibid. 5.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials for making capital goods required for authorized operations except prohibited items under the Import Trade Control (Harmonized System) Classifications of Export and Import Items. 27 (7) The goods already imported or shipped or arrived before the issue of Letter of Approval shall be eligible for duty free clearance provided customs duty has not been paid and goods have not been cleared from Customs or cleared and placed in the Bonded Warehouses. 28 (4) The Unit or Developer may also procure goods required for the authorized operations, without payment of duty, from International Exhibitions held in India or from bonded warehouses set up under the Foreign Trade Policy and under the Customs Act in the Domestic Tariff Area; 5.15 In its most fundamental sense, a bonded warehouse is one of the types of warehouses sanctioned by customs authorities, specifically designed to house imported goods without the immediate burden of import duties or taxes. This allows business enterprises to store their goods without paying duties until they are ready to be released into the domestic market. On the other hand, in non-bonded facilities, duties on the items imported and kept, are already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 28(4) of the SEZ Rules, 2006, reads as, 28 (4) The Unit or Developer may also procure goods required for the authorized operations, without payment of duty, from International Exhibitions held in India or from bonded warehouses set up under the Foreign Trade Policy and under the Customs Act in the Domestic Tariff Area; Whereby, it could be seen that the legal provisions, identify and accommodates both types of bonded warehouses, whether set up under the Foreign Trade Policy (warehouses under SEZ/FTWZ), or under the Customs Act (Customs bonded warehouses). Both the customs bonded warehouses and the warehouses under the duty-free zones are special warehousing regimes that offer logistics solutions tailored to international trade, each with their own advantages and benefits. While the customs warehouse stands out for its focus on secure warehousing and efficient inventory management, the warehouses in duty-free zones are notable for its commercial freedom and tax advantages. In effect, both the types of bonded warehouses offer financial respite to the business houses in the form of tax deferral. 5.18 It is to be noted here that while the terms warehouse and warehoused goods have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnai Free Trade Zone figures at Sl.No. 113 with Port Code INCJJ6 . Later, by way of Circular No. 19/2016-Customs dated 20.05.2016, on the subject Allotment of Warehouse Code for Customs Bonded Warehouses , the Central Board of Excise and Customs in para No. 1 stated as follows:- Please refer to the changes made in the Finance Act, 2106 to shift towards record based control with respect to Bonded Warehouses. It is proposed that each warehouse be allotted a unique warehouse code so that importers can declare the warehouse in which goods shall be deposited, at the into-bond bill of entry stage. It has also been explained in the Annexure to the said Circular about the generation of eight digit Warehousing Code, whereby the first 4 characters indicates the EDI port of registration, the fifth character to denote the type of warehouse and the sixth, seventh and eighth characters are running numeric serial numbers. The User Manual on SEZ Web Forms by ICEGATE 2.0 prescribes two types of Bill of Entry, viz., 1. Z type BOE:-SEZ BE (FTA-SEZ) and 2. T type BOE:-SEZ (DTA Sales Trading). The Manual further prescribes that General and Warehouse details pertaining to the import is required to be pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 8 (a) of Schedule III of the CGST Act, 2017 is to be considered as the provision that is most akin to the instant transaction, and the provisions of 8 (b) of Schedule III of the Act, ibid, stands effectively ruled out as it is meant to cover a specific situation/activity, i.e., by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India . 5.23 Under these circumstances, we are of the opinion that a Free Trade Warehousing Zone , as the name suggests, is a bonded premises providing warehousing facility, much in parity with the bonded warehouse under the Customs Act. Further, when the goods are imported and brought into a FTWZ unit, they are basically warehoused first and then traded or subjected to other authorized operations as the case may be. We notice that the appellant s queries for advance ruling in the instant case is restricted to the first stage, i.e., when the imported goods are supplied to any person before they are cleared for home consumption, while they still remain warehoused. Accordingly, we are of the considered opinion that the provisions of 8 (a) of Schedule III of the CGST Act, 2017, viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of Section 17 (2) and 17 (3) that talks about apportionment of credit in such situations when a taxable person effects taxable supplies as well as exempted supplies, reads as below, (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. 5.28 Prior to the amendment to Section 17 of the CGST Act, 2017, carried out under the Finance Act, 2023 (8 of 2023), the explanation to sub-section (3) of Section 17, read as follows :- Explanation . For the purposes of this sub-section, the expression value of exempt supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule (5), (a) in Explanation 1, clause (c) shall be omitted; (b) after Explanation 2, with effect from the 1st day of October, 2023, the following Explanation shall be inserted , namely: - Explanation 3:- For the purpose of rule 42 and this rule, the value of activities or transactions mentioned in sub-paragraph (a) of paragraph 8 of Schedule III of the Act which is required to be included in the value of exempt supplies under clause (b) of the Explanation to sub-section (3) of section 17 of the Act shall be the value of supply of goods from Duty Free Shops at arrival terminal in international airports to the incoming passengers. . 5.30 Further, perusal of the excerpts of para 7.59 of the Minutes of the 47th Meeting GST Council held on 28th 29th June, 2022 , confirms the position that the intention behind these amendments, is to include certain transactions (supplies from Duty Free Shops , specifically) under paragraph 8 (a) of Schedule III of CGST Act in the value of exempt supply, for the purpose of reversal of appropriate ITC. For facilitation, the relevant portion of the same is reproduced as below :- ii. For future, there is a need to exclude refund in respect of ITC on inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
